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GM 1135

Informing the Legislature that on May 26, 2026, the Governor signed the following bill into law: HB2329 HD1 SD1 CD1 (ACT 035).

2026 Regular Session

Hawaii now conforms its tax laws to the federal IRC for years after 2025, affecting income, estate, and generation-skipping transfer taxes and aligning deductions, credits, and sta

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WeVote Research Nonpartisan
Bill Summary · GM 1135

Summary of GM 1135 (HB 2329, HD 1, SD 1, CD 1) — Conformity to the Internal Revenue Code

Purpose and intent

  • The act conforms Hawaii’s income, estate, and generation-skipping transfer tax laws to the federal Internal Revenue Code (IRC).
  • Effective date focus: applies to taxable years after December 31, 2025 for most provisions, with estate/generation-skipping transfer rules applying to decedents/transfers after December 31, 2025.

Key provisions and changes

  • Conformity to IRC for Hawaii's tax regime:
    • Section 235-2.3 (general conformance): Hawaii tax computations for all years after 2025 use the federal IRC as amended through December 31, 2025, with specified provisions either operative or non-operative per this chapter.
    • The bill explicitly adopts or excludes numerous IRC provisions and Public Law (federal) updates, including:
    • Specific treatment of various federal relief programs (e.g., Economic Injury Disaster Loans, restaurant revitalization grants, recovery rebates) as they apply for Hawaii gross income calculations.
    • Partial and broad adoption of federal deductions, credits, and rules, while retaining Hawaii-specific limitations or adaptations where indicated.
    • Select tax provisions that are not operative for Hawaii purposes (e.g., certain sections of Subchapters, and certain international or special-case rules), and others that remain operative with Hawaii-specific thresholds or adjustments.
    • Adjustments to standard deduction amounts:
    • Hawaii’s standard deduction amounts are aligned with the percentages/amounts specified in the act for taxable years beginning after 2023 onward, with scheduled step-ups:
      • 2025: joint returns, surviving spouse, head of household, and single/filer thresholds specified (e.g., joint up to $8,800; head of household up to $6,424; single $4,400; etc.).
      • 2029-2030+ thresholds rise progressively (e.g., joint up to $24,000 by 2030; other categories adjust accordingly).
    • For nonresidents, standard deduction calculation follows Hawaii statute 235-2.4.
    • Limitations and carve-outs:
    • Several federal sections are explicitly not operative or are operative only under Hawaii’s framework, including selection of which federal subchapters, sections, and parts apply for Hawaii tax purposes.
    • Certain itemized deduction limitations (Section 68) are retained in forms as of 2009 federal thresholds, with adjustments described.
    • Special rules for casualty losses, medical expenses, and charitable contributions are tailored per the statute’s language.
    • Other tax code integrations:
    • The act includes operative treatment or non-operativity for other IRC sections (e.g., Section 164 on state/local tax deductions, 165 on losses, 168 on depreciation, 179/179A adjustments, 280E regarding illegal drug expenditures with cannabis caveat for licensed dispensaries, and numerous other sections) to reflect Hawaii’s tax policy while ensuring consistency with federal tax law where Hawaii permits.
  • Estate and generation-skipping transfer tax conformity:
    • Section 236E-3 (conformity to IRC; general application) applies to decedents dying or transfers occurring after December 31, 2025.
    • Internal Revenue Code Subtitle B (as amended through 2024–2025) governs estate and GST transfer calculations, with Hawaii-specific adaptations as provided in the act.
  • Other conforming adjustments:
    • Section 235-2.45 and related sections adjust conforming references for partial exclusion items (e.g., Section 1202) to reflect 2024 form as the operative baseline, with specified exceptions.
    • The act repeals bracketed material and adds new statutory language to implement the conforming framework (Section 6).

Who and what is affected

  • Hawaii individual and corporate taxpayers:
    • Taxable years after 2025 will follow the IRC as conformed in Hawaii under this act, affecting gross income, AGI, deductions, credits, and taxable income calculations.
    • Hawaii resident, nonresident, and part-year resident taxpayers receive standardized deduction adjustments and other conformity changes.
  • Estate and GST taxpayers:
    • Dying decedents after 2025 and related generation-skipping transfer scenarios are governed by the updated IRC-based framework as adopted by Hawaii.
  • Public benefits and relief programs:
    • Federal relief and grant programs (EIDL, restaurant grants, recovery rebates, shuttered venue grants, etc.) are treated for Hawaii tax purposes in accordance with the act, but with Hawaii’s conformity rules.

Procedural and timeline aspects

  • Effective date:
    • The act takes effect upon approval (May 26, 2026).
    • Sections 2, 3, and 4 apply to taxable years beginning after December 31, 2025.
    • Section 5 (estate/GST conformity) applies to decedents dying or transfers occurring after December 31, 2025.
  • Legislative context:
    • The bill was signed into law as Act 035 by the Governor on May 26, 2026.
    • The document GM 1135 (HB 2329 CD1) serves as a formal informing communication to the Legislature that the Governor signed the bill into law.

Note: This summary focuses on the substantive conformity-to-IRC provisions and their anticipated operational implications for Hawaii tax administration, taxpayers, and estates, while highlighting the phased effective dates and the scope of operative versus non-operative IRC sections.

Compiled from official sources — confirm details with the bill’s official record.

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